Molina’s revenue climbs 43% in Q1 on exchange, Medicaid premium growth


A pause on Medicaid redeterminations and the marketplace special enrollment period drove Molina Healthcare’s revenue up 43% during the first quarter of 2021, with much of the cash coming from growth in premiums.

During the first quarter, Molina reported revenue of $6.5 billion, up from $4.5 billion during the same time last year. The Long Beach, Calif.-based company generated $6.3 billion in premiums, up 47% year-over-year, and credited growth to new marketplace and Medicaid members.

The payer now counts 620,000 Obamacare members, up 88% from the year before. Molina’s Medicaid membership reached 3.8 million, up 29% from 2.9 million in 2020. On an investor call, CEO Joe Zubretsky said these two business lines are essentially tied—the insurer models its marketplace plans on its Medicaid managed-care program, with slightly wider networks—and views acquisitions in both areas as a way to grow going forward.

“We’re a very niche business. We do not serve affluent suburbanites. We serve the working poor,” Zubretsky said of its Medicaid and marketplace members.

In the first quarter, Molina generated $228 million in net income, up 28% from $178 million during the same time last year. Its medical loss ratio, or MLR, which measures how much the company spent on medical care for members, reached 86.8%.

Despite the strong showing in the quarter, here are five ways Molina’s future results could be negatively affected:

1. Risk-sharing corridors bills totaled $110 million. Molina reiterated that COVID-19 costs were expected to cut $1.50 from its earnings per share price for the year. These costs reflect the increased number of risk-sharing corridors states have enacted to claw back managed-care revenue not spent on medical care care. In the first quarter, Molina received a $110 million risk-corridor expense. Going forward, Zubretsky said he expects risk-corridor costs to decline as states end these programs, pointing to New York and California already announcing that they would close these initiatives in 2022. He said risk-corridors unfairly penalize Medicaid managed-care companies that achieve operational efficiencies and believes that the traditional rate-setting process is a better way to gauge insurers’ effectiveness. These expenses are eventually passed on to consumers, he said.

“It promotes inefficiency by not allowing efficient operators to hold onto their portion of the capitated rate that they’re truly driving,” Zubretsky said.

2. Seniors avoiding the doctor could impact 2022 revenue. Molina’s Medicare membership rose to 126,000, up 20% from 105,000 in 2020. Zubretsky said the company was still struggling with capturing risk scores from this population, which could impact their revenue for 2022 if the payer cannot accurately measure the acuity of their conditions.

3. Molina must re-bid on its Kentucky Medicaid contract. On Wednesday, the Kentucky state court upheld an order that allows Molina to participate in the state’s Medicaid managed-care program, Zubretsky said. He added that, while the judge upheld the state’s six-plan Medicaid program, the motion did not address the legality of Molina’s $23 million Passport purchase. He said the judge called for the state to issue a re-procurement process for its Medicaid program, admitting that there were “irregularities to some aspects of the proposal process.”

“Whenever that happens, we’ll be bidding on the contract, and we’ll be bidding as an incumbent,” Zubretsky said.

4. Medicaid redetermination pauses mean $150 million in revenue per month. Just for as long as the public health emergency remains, Zubretsky said Molina could generate $150 million in monthly revenue thanks to a pause on states checking enrollees’ Medicaid eligibility.

5. Growth in Obamacare could mean adverse selection. Zubretsky credited the Obamacare growth to the expanded subsidies and special enrollment period, although he cautioned that the increase in new members could cause adverse selection.

“Anytime we take on new members, by its very nature, you don’t yet understand the acuity of that population,” he said.